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I noticed when playing today that a player using fauns was conquering several regional occupied by elves, yet the player with the elves was not gaining any token. It seems that the system was counting the token claimed through the faun power and the token reclaimed through the elf power as the same token. He started with 11 elves and after being conquered several times by the fauns over several turns, still had 11 elves.

It was my understanding that the elves would gain 1 token each time being conquered by a faun (instead of it being a gain 1 lose 1 wash like the other races) since they don't lose one to begin with.

No race can grow beyond their maximum number of tokens. Since 11 is the max that Elves can have, they don't gain more. Now if they had been Merchant Elves (starting with 8 tokens), they would gain tokens up to 11.